A letter issued this month by New Jersey’s electricity grid operator launched a fast-track stakeholder process to establish new rules for the grid interconnection of data centers and other large-load electricity users while still ensuring adequate total supply.
The operator, PJM Interconnection, oversees the grid for 13 states including New Jersey. The goal, according to David E. Mills, chair of the board of managers, is to file its plan with the Federal Energy Resources Commission by the end of 2025.
PJM’s last two capacity auctions produced record-setting prices for electrical capacity supply, contributing to soaring retail prices and a political backlash in most of the states in the PJM service area.
For many elected officials, including Gov. Phil Murphy of New Jersey, PJM has become the whipping boy for price hikes that have angered voters and led to energy policy’s catapulting to the top of voter concerns in the November elections.
Using a fast-track process, PJM hopes to have its proposal approved in time for the June 2026 auction for the 2028/2029 base capacity period. PJM’s own long-term load forecast shows peak load growth in the PJM area of 32 gigawatts out to 2030, with almost all of the load growth attributed to data center growth.
The board’s letter states: “This onrush of demand has created significant upward pricing pressure and has raised future resource adequacy concerns.”
The board said the fast-track effort will focus on four main areas: resource adequacy, reliability criteria, interconnection rules, and coordination. It did not mention affordability in that list of concerns.
Some environmental advocacy groups have already issued statements of concern.
The National Resources Defense Council argues that delays in bringing new resources online to meet the rapidly increasing demand will likely continue to result in significant increases in prices for consumers. According to an NRDC press release, “PJM is creating rules for how to manage the reliability risk” associated with data center demand, but these “will do little to protect residents from rising energy bills.”
PJM admits its forecasts show the need for new sources of supply but adds that many of the projects to produce increased supply “are being hampered by factors outside of PJM’s control, such as sitting and permitting challenges and supply chain backlogs.”
Another climate-based advocacy group, Evergreen Action, argued, “PJM’s proposal falls short of tackling the broader energy affordability crisis caused by data center growth.” The group goes on to say that data centers should have to “pull their own weight,” meaning they should be required to deliver their own “clean, cost-effective” power to meet their own demand.
Meanwhile, an August report by investment management company JLL [Jones Lang LaSalle Inc.] states that New Jersey is quietly becoming a top-five market for data centers. This puts the state in the position of wanting to be a player in the economic development potential associated with data centers and artificial intelligence while at the same time having to deal with the political disruption caused by ratepayers who are told daily by the media that data centers are a major part of the electricity pricing problem they are facing.
In South Jersey, Dutch AI infrastructure company Nebius announced a planned construction of a new data center in Vineland with capacity of up to 300 MW.
Promoting the economic development potential of these data centers while protecting other ratepayers from the price shocks the centers might otherwise produce is the subject of legislation circulating in Trenton.
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
